As the average age of financial advisors creeps higher each year, and grows closer and closer to the traditional age of retirement, a growing chorus of voices have warned of the looming onslaught of advisors retiring, the lack of young talent to take over their firms, and thus a wave of advisory firms that will come up for sale resulting in a competitive a buyer’s market that will make advisors regret having waited to sell. Yet despite what has been portended by demographics, the wave of selling has not come, advisory firm merger-and-acquisition activity has remained relatively flat for years, and if anything the drive for larger firms seeking inorganic growth through acquisitions and tuck-ins has led increasingly towards a seller’s market, despite nearly all predictions to the contrary.
Given that industry studies still find the overwhelming majority of advisors have no succession plan (and aren’t taking the steps to create one), it raises the question of whether the entire succession planning crisis may actually be a mirage… for the simple reason that most advisors would be financially better off staying in their practices than selling them anyway, and many find their advisory work a professional vocation so personally fulfilling they wouldn’t want to leave it anyway… especially if the practice can be adjusted to better accommodate their later years’ lifestyle preferences.
Thus, while succession planning may remain relevant for a small subset of firms that really wish to pursue such a strategy and are prepared to execute it, perhaps it’s time for the companies that support financial advisors and the industry at large to recognize that the majority of advisors need support for exit and continuity planning, not succession planning. The focus should be on how to redesign a firm into a lifestyle practice, with ways to ensure that clients are well served even if an advisor stays in their practice until the very end, and that an advisor’s spouse or heirs might even receive some “terminal” value to the practice once they are gone (in addition to enjoying the cash flow from the business along the way)… rather than continuing to collectively attempt to “guilt” advisors into leaving a practice that they don’t want to personally or financially let go of anyway!